Chancellor Jeremy Hunt outlined three priorities of stability, growth and public services as part of his Autumn Statement delivered to The House of Commons on the 17th of November 2022. Our latest article summarises the key announcements made in the Autumn Statement.
Chancellor Jeremy Hunt delivered his Autumn Statement to the House of Commons on the 17th of November 2022. He set out plans to increase taxes and reduce spending in a bid to narrow the gap between the funds the government receives in revenue and its spending.
After his predecessor’s mini-budget in September triggered a slump in the pound, the Autumn Statement was intended to reassure the markets by demonstrating fiscal responsibility.
Income Tax Bands
The current tax-free personal allowance of £12,570 will be frozen until 2028 – a two-year extension to the freeze, which was previously expected to end in 2026. Additionally, the threshold for the highest rate of tax will be reduced from £150,000 to £125,140. The additional tax rate of 45% will be payable on all earnings above the £125,140 threshold. It is estimated that taxpayers paying the additional tax rate in 2022/23 will see an increase of at least £1,243 for 2023/24.
The Chancellor announced that the tax-free allowance for dividend income will be halved from the 6th of April 2023 to £1,000. It would be halved again to £500 from the 6th of April 2024. The tax rate that will apply to dividend income will depend on an individual’s tax band, with the current rates continuing in future years at 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers.
National Insurance Contributions
In July, the threshold at which workers start paying National Insurance Contributions (NICs) was raised from £9,880 to £12,570. In November, the Health and Social Care Levy was reversed, saving almost 30 million workers an average of £480 in total in 2023-24. However, the main NIC threshold for employers, employees and self-employed individuals will remain frozen from April 2023 – April 2028.
Capital Gains Tax
The tax-free capital gains annual exemption will be reduced from £12,300 to £6,000 from the 6th of April 2023. A further reduction will be made from the 6th of April 2024 to £3,000. However, the rates of capital gains tax payable above the Annual Exempt amount remain unchanged at 10% and 28% depending on the individual’s level of income and the type of asset sold.
Currently, inheritance tax is payable on any estate above £325,000 and is taxed at 40%. When a family home is passed to children or grandchildren, the ‘residence nil-rate band’ increases the tax-free allowance to £500,00. These thresholds have been frozen until 2028.
HMRC and Tax avoidance
Chancellor Jeremy Hunt has announced a package of measures to tackle tax evasion, avoidance and wider non-compliance estimated to raise around £1.7 billion over the next five years. The package includes a £79 million fund for additional staff to tackle cases of serious tax fraud and wealthy taxpayers’ non-compliance. It is estimated that this will raise £725 million in addition to the £292 million predicted in the 2021 Spending Statement.
Support with energy bills
The government has committed to publishing a review of the Energy Bill Relief Scheme for businesses and other organisations by the 31st of December 2022. It has stated that any support offered beyond March 2023 will be at a reduced rate. However, Chancellor Jeremy Hunt announced an extension to the Energy Price Guarantee for households which will not run throughout 2023/24. The scheme guarantees that typical household energy costs will not exceed £2,500 for 2022/23 and £3,000 for 2023/24.
National Living Wage Increase
The government remains committed to tackling low pay and announced that from the 1st of April 2023, the National Living Wage would increase by 9.7% to £10.42 an hour for those aged 23 and over.
Company car tax changes
From April 2025, electric cars, vans and motorcycles will begin to pay road tax like petrol and diesel vehicles.
Stamp Duty Tax Cuts
The stamp duty tax cuts introduced by former Chancellor Kwasi Kwarteng will end in March 2025.
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